Royal Mail: MPs fear shares undervalued after last-minute rush

Heavy demand for Royal Mail shares in run-up to midnight deadline fuels cries
from MPs that the sell-off is undervalued

Postal workers are expected to back industrial action over issues linked to the Royal Mail privatisation.

By Telegraph Reporter

12:30PM BST 09 Oct 2013

A last-minute rush for Royal Mail stock refuelled expectations that the share price will jump when trading begins next week as MPs voiced fresh fears that sell-off was undervalued.

“Forty percent of the money we took for Royal Mail came late on Tuesday,” said one broker, who was “astonished” by the “extremely heavy demand” as the midnight deadline approached.

The brokerage received tens of thousands of applications, almost all online. Demand was also heavy at banks and other brokers dealing with the privatisation.

IG Index said on Wednesday that the spread on the share sale was 387.5p-407p. This implies a mid-maket grey market price of around 397p, which is slightly down on Tuesday but 20pc above the top of the Government’s 300p-330p range.

This has led MPs to table an Early Day Motion in Parliament calling on the coalition to review its decision to privatise the 500-year-old busienss, saying they fears the sell-off will benefit speculators rather than the public

The SDLP motion reads: "This House... is deeply concerned that the market pressures of privatisation will lead to the watering down of long held social compacts including the universal service obligation and the commitment to deliver six days a week; has reservations that the sell-off will be highly lucrative for speculators, hedge funds and investment banks rather than the public; and calls on the Government to review its decision and reassure the public that a fully functioning service will remain in place."

Vince Cable, the Business Secretary, is expected to face questions over claims that the sale is undervalued when he gives evidence on the privatisation to the Business, Innovation and Skills Select Committee this afternoon.

Ahead of the grilling, postal workers staged a protest outside Parliament, with activists dressing up as highway robbers, carrying banners saying: "The Great British Royal Mail Robbery."

Conditional trading in Royal Mail shares start on Friday and full trading begins next Tuesday - a day before the result of a strike ballot by the Communication Workers Union.

CWU members are expected to back industrial action over issues linked to privatisation, with any strike set to be held on or after October 23 - the run-up to the busy Christmas period.

Billy Hayes, general secretary of the CWU, said: "It's no surprise that the Government has sold the postal service cheap to its friends in the City. The public didn't want the service sold and will get a worse service as customers. Now they also know they are getting a bad deal as taxpayers too."

Chuka Umunna, Mr Cable's Labour counterpart, said urged the Government to pull the plug on the privatisation to prevent a "massive bonanza" for City speculators.

Mr Cable has warned Labour that its opposition to the sale was "irresponsible" and, in a letter to Mr Umunna, said value for money for the taxpayer was an "absolutely key consideration".